The Science of Contacting Suppliers When You're Starting a Business

Understanding Supplier Code of Conduct: What Is It, and Why Does It Matter?

10 min read

Running a business in any industry involves some degree of risk management. Companies face risks in several different ways, some of which are unique, while others are universal.

Working with a supplier or manufacturer presents certain risks, though hopefully, they are few and far between. But the simple fact is that your business is relying on another company to provide your products. There is an inherent risk in this nonetheless.

This is why it’s essential to be careful when selecting your suppliers. Quality products and safe, ethical manufacturing processes are a must, regardless of what industry you are in. But how does your company ensure that its suppliers are operating according to your own standards? The best way to do this is to establish a strong supplier code of conduct.

What is a supplier code of conduct? Why are supplier codes of conduct useful? And what guidelines should you follow when creating a supply chain code of conduct? Follow this guide for answers to all of these questions.

What Is a Supplier Code of Conduct?

A supplier code of conduct is an official document outlining your company’s expectations for how suppliers should operate. The code of conduct can include social, ethical, environmental, labor, and product quality concerns.

The code of conduct can be used by your company and suppliers to inform their decisions and reactions in emergencies. A supply chain code of conduct also sets a clear standard for a company’s expectations from its suppliers and manufacturers. In addition to outlining expectations, your code of conduct should also document the methods used to monitor your supply chain.

Here is a quick breakdown of the key areas that should be covered in a code of conduct.

Social and ethical conduct

Ethical standards should outline appropriate behaviors for suppliers in conducting business and operations. This section should cover topics like corruption, hate speech, or discrimination.

Environmental conduct

Environmental concerns include the materials used in manufacturing, as well as how harmful materials are stored and disposed of. The environmental code of conduct might also factor in things like shipping, packaging, and transportation.

Labor conduct

Your code of conduct must have rules in place to ensure that all suppliers adhere to certain labor laws. This includes child labor laws, working conditions, fair wages for workers, and fair working hours.

Product quality

Lastly, you should seek to ensure that suppliers do not engage in any misleading or shortsighted practices that can damage product quality. When you agree to work with a supplier, you do so with certain expectations about the quality of their products. Failure to meet these standards can become a problem if the supplier uses improper manufacturing processes.

What Is the Purpose of a Supplier Code of Conduct?

Having a supply chain code of conduct is useful for several reasons. Namely, it gives a clear outline to employees and suppliers on how they should operate. A good supply chain code of conduct can also help companies improve their supply chain performance and product quality. Here are some more details about the advantages of having a good supply chain code of conduct.

Documentation

The most fundamental reason why a supplier code of conduct is useful is for documentation. Having proper documentation provides stability and organizational guidance in the event of an emergency. This can be a crucial form of protection for your brand image should a crisis arise.

It also simply makes it easier to address questions and concerns about supply chain issues without conflict or hesitation.

Improvement

Most supply chain codes of conduct include a section for ongoing improvement. This allows companies to identify vulnerabilities in their supply chain. By monitoring and documenting these areas for improvement, companies can grow and offer better services to their customers.

Supply chain consistency

Lastly, having a supplier code of conduct gives companies more control over their supply chain. As mentioned earlier, suppliers are usually independent entities that are not necessarily controlled by retailers.

But having a supply chain code of conduct ensures that your suppliers must adhere to your company standards. Without a code of conduct, companies would have limited power in addressing issues or concerns with their suppliers.

How to Make a Supply Chain Code of Conduct

Understanding why it’s important to have a supplier code of conduct is important. But this means very little if you don’t also know how to make a supply chain code of conduct. If you are unsure where to begin, you can follow this supplier code of conduct template.

1. Assess supply chain for risks and vulnerabilities

The first step in establishing your code of conduct should involve a review of your current supply chain. Where are products sourced from? What are the labor laws in those regions? What materials are used in manufacturing, and what shipping methods are used?

This allows your company to identify potential problems as well as areas that need improvement, whether for ethical, quality, or environmental reasons.

2. Communicate with suppliers about code of conduct

Once you have a framework in place, you can reach out to suppliers to discuss your code of conduct. You do not want to implement a code of conduct without alerting them first. This allows your suppliers to provide input as well as make any necessary adjustments in their agreements with you.

3. Reach out to other companies in your industry

You also shouldn’t be afraid to look to your competitors for examples. Reach out to other companies in your industry to learn about their supplier codes of conduct. This way, you can build off an established framework that is already proven to work elsewhere.

Key Resources for Making a Supplier Code of Conduct

Lastly, you should know where to look to find clearly defined rules and guidelines for a supplier code of conduct. Several key resources are consistently cited when it comes to labor, environmental, and social standards:

The UN’s Universal Declaration of Human Rights
The International Labour Organization’s International Labour Standards
The International Organization of Standardization’s ISO 14000 Environmental Management Standards

Each of these resources provides a solid framework for global standards across all industries. You can, and should, customize your supply chain code of conduct to suit your company’s needs. However, having a strong universal framework in place is a great starting point that lends authority to your conduct code.

How to Implement Supplier Code of Conduct

Once your code of conduct is in place, all that’s left to do is implement it. There might be several tools you use to implement your code of conduct and make sure it’s adhered to. First and foremost, you need to communicate it clearly with all employees and suppliers alike. This can be done through whatever channels you prefer, as long as you make sure that it’s received and understood.

You might also consider training employees on adherence to the supply chain code of conduct if necessary. This can ensure that the code of conduct is monitored and closely followed throughout operations.

Lastly, you should also conduct periodic reviews of your supply chain as laid out in your code of conduct. Consistently monitoring the supply chain for performance and quality makes this process much easier.

Want to learn more about tools to help manage your inventory and supply chain? Read Ecwid’s opinions on the best store management software available today. Managing a supply chain is a multifaceted and ongoing procedure that requires a range of tools. Ecwid can help find the right tools and implement them seamlessly into your online store, no matter what you sell.

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Jul 22, 2022

About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.